New South Wales Supreme Court CITATION : GE Marketing v Emerald [2003] NSWSC 219 HEARING DATE(S) : 24/03/03 JUDGMENT DATE : 24 March 2003 JURISDICTION: Equity Division JUDGMENT OF : Master Macready at 1 DECISION : Paragraphs 19-21 CATCHWORDS : Corporations Ljaw. Application to set aside statutory demand. Whether matters sufficiently raised in affidavit filed within time. Demand set aside. No matter of principle. PARTIES : GI Marketing Services Pty Limited v Emerald Civil Engineering Pty Limited FILE NUMBER(S) : SC 6075 of 2001 COUNSEL : Mr P. Donohoe for plaintiff Mr Cancert for defendant SOLICITORS : Paul Tipper & Associates for plaintiff Lenehan & Co for defendant - 1 - THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION MASTER MACREADY TUESDAY 25 MARCH 2003 6075/01 - G I MARKETING SERVICES PTY LIMITED v EMERALD CIVIL ENGINEERING PTY LIMITED JUDGMENT 1 MASTER: This is an application to set aside a statutory demand dated 29 November 2001 claiming two different amounts. The first one is said to be for professional services, being invoice number 1069, for $28,495.28. The second amount is alleged to be retention moneys under a contract for $4,107.55. 2 These retention moneys have, since the time of the issue of the demand, been paid, and $10,000 paid off the other claim. 3 The parties previously had a lump sum contract for building works. Under that contract all amounts due under the contract were paid. The present claims appear to be additional claims for other work. 4 It is said there are genuine disputes and offsetting claims in relation to the amounts claimed in the demand. The offsetting claim for damages for delay was not referred to in the affidavit filed and served within time. This raises the question of jurisdiction. There is no doubt that it is possible to supplement material filed in time by a later affidavit, and the principles in this regard have been stated by Sunberg J in Graywinter Properties Pty Limited v Gas & Fuel Corp Superannuation Fund, 21 ACSR 581 at 587: "There has been a clear dispute on the case as to whether or not, provided there has been a supporting affidavit filed within the twenty-one day period of the application, that it may be amended by allowing additional grounds raised after the twenty-one day period. In Civil Systems Pty Limited v BT Constructions Pty Limited, a decision of mine on 15 December 2000, I drew attention in paragraph 11 to the different first instance decisions to which I had been directed at that time. 5 The matter has been dealt with further by a judge of this Court and also the Full Court of Western Australia. In Process Machinery v ACN 057 260 590 (2002) NSWSC 45, Barrett J decided that a new ground could not be raised in such circumstances. At paragraph 16 and following his Honour expressed his views as follows: 'Furthermore, the applicant is confined to the grounds shown by the application and supporting affidavit filed and served within the 21 day period to which section 459G refers. This last point is important. It was recently confirmed by the Full Court of the Supreme Court of Western Australia in Energy Equity Corp Ltd v Sinedie Pty Ltd (2001) WASCA 419 (20 December 2001). Wallwork J (with whom Steytler J and Olsson AU agreed) quoted the following passage from the judgment of Perry J in D & S Group of Companies Pty Ltd v O'Connor Investments Pty Ltd (1975) 15 ACLC 1794 (in which the opening words refer to an observation of Gummow J in David Grant): 'It seems to be implicit in that observation and from the terms of 459G(3) that if an affidavit is to be used in support of the application, it must be filed within the defined period of 21 days. It seems to me then that the affidavit of Mr Savvas having been filed and served well after the expiration of the period of 21 days, insofar as it raises any ground offered in support of the application not identified in the affidavit of Mr Gerovasilis filed within time, could not be taken into account in determining h application Furthermore, David Grant is authority for the proposition that there is no ability to extend the time limit.' Wallwork J also quoted from the judgment of Mandie J in Missay Pty Ltd v Seventh Cameo Nominees Pty Ltd (In liq) (2000) VSC397: 'I think that there is another reason for refusing special leave because it seems to me that the interpretation of the Corporations Law contained in D & S Group of Companies Pty Ltd v O'Connor Investments Pty Ltd (1997) 15 ACLC 1794 at 1798 is applicable and should be followed by this Court. If a ground in support of an application to set aside a statutory demand is not identified within the period provided by the Corporations Law, then it seems to me that it cannot be relied upon out of time upon appeal.' Wallwork J's conclusion was then stated: 'In my view it now seems to be accepted that an affidavit filed outside the 21 day period which raises a new ground or grounds to set aside a statutory demand (as opposed to an affidavit which expands on grounds in an earlier affidavit which has satisfied the threshold test) cannot be used in an application of this nature. The Corporations Law operates throughout Australia and uniformity of approach is desirable.' This is consistent with the conclusion reached earlier in the same year by Wilson J of the Supreme Court of Queensland in Raffles Corporation Pty Ltd v Cech (2001) QSC 129. 'Under s 459G 'an affidavit supporting the application' must be filed within the 21 days. The affidavit must disclose facts showing a genuine dispute, but it need not go into evidence: ass Sundberg J held in Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 14 ACLC 1703, the supporting affidavit filed within the 21 days may read like a pleading. It may be supplemented in the sense that a further affidavit containing evidence proving the facts asserted in that affidavit may be filed after the 21 days. Indeed, on the hearing of the application only admissible evidence can be relied upon. However, evidence supporting some other grounds not raised in the affidavit filed within the 21 days may not be relied upon. See also Eden Bay Pty Ltd v Bennett (1997) 15 ACLC 1634. Accordingly, the present applicant may not rely on grounds not set out in the affidavit filed within the 21 days.' This raises a question about the nature and extent of definition or assertion required. In Energy Equity Corp the company sought to rely on an offsetting claim in the form of a cause of action in negligence. It was not permitted to do so because this 'was not specifically referred to in the first affidavit'. D & S Group of Companies was also a case in which a particular offsetting claim was raised for the first time after the expiration of the 21 day period. In Raffles Corporation, the company wished to argue, as part of an asserted genuine dispute, an alleged oral agreement varying the operation of a lease, an alleged termination of that lease and a calculation of interest in a way said not to be consistent with the lease terms. This was in circumstances where the affidavit dealt only with the identity of the lessor and a particular deduction of $2500 and did not foreshadow in any way the additional objections later advanced. It is thus reasonably clear that the relevant concept of 'raising' or 'identifying' a particular ground involves some verbal delineation of that ground in the s 459G(3)(a0 affidavit. If a debt of $10,000 were claimed as one year's interest under a contract providing for interest at the rate of 9% per annum on a principal sum of $100,000, it would not, in my opinion, be sufficient for the affidavit to annex the loan agreement and say no more. It would have to refer at least to the connection between the contract and the debt claimed and put in issue the calculation of interest – even if it merely said, 'The debt does not accord with the annexed contract.' The real point is that the application and affidavit filed and served within the 21 days period must fairly alert the claimant to the nature of the case the company will seek to make in resisting the statutory demand. The content of the application and affidavit must convey, even if it be by necessary inference, a clear delineation of the area of controversy so that it is identifiable with one or more of the grounds made available by ss 459H and 459J. That process of delineation may not be extended after the end of the 21 day period, although it is open to the plaintiff to supplement the initial affidavit by way of additional evidence relevant to the area of controversy identified within that period.' 6 Having regard to his Honour's reasoning and the cases to which he referred, I think that the better view is as decided by his Honour, namely, that unless the particular dispute is raised in the affidavit filed within time, it cannot be dealt with in later affidavits. This is subject to the qualification, of course, that a genuine dispute arising out of a matter of law, which does not require evidence to support it, would, of course, always be available to be argued. See Callite v Peter John Adams & Ors [2001] NSWSC 52. 7 In these cases the offsetting claim cannot be raised. 8 The same problem arises in another area, namely, whether the work was authorised. In the later affidavit the deponents squarely raise the question whether it was authorised and it is necessary to see whether this also appears from the first affidavit of Mr Greenaway sworn 20 February 2001. 9 Paragraph 5, which is the main paragraph dealing with the words, states: "I say there is a genuine dispute as to the existence and/or amount of the debt because of the following." 10 It then goes on to deal with a number of matters, including subclause (d) where the deponent queried items on the amount with which I am concerned. 11 Having regard to the commencing words in paragraph 5, I would have thought that that is sufficient to raise a suggestion as to whether the work in fact was authorised because it queries whether any amount was in existence at the time and date. 12 The defendant's affidavit really gave no admissible evidence as to the request for the work and, bearing in mind the sworn evidence of Mr Greenaway in his affidavit of 20 August 2002 that he did not authorise the work, there appears to be a dispute as to whether the work was authorised as requested. 13 The real question arises as to whether this is genuine. In this regard it seems to me there is in fact some doubt on this aspect. Mr Greenaway was on the site, saw the work being done, has paid moneys on account, and he has only addressed in detail a couple of matters in the account. They are related matters being known as items 3 and 4. 14 In my view, I do not think that the dispute as to the authorisation of the work was genuine, or rather, if I can put it another way, I have doubts as to whether that is the case. The matter is, however, put beyond doubt when one looks at the question of whether there is a dispute as to the amount of the claim. In the first affidavit in paragraph 5(e)(f) and (g) the deponent, Mr Greenaway, raises arguments with the actual amount and whether it was appropriate to fully charge them to his company. 15 He also raises questions about the amount of the hire, and the labour charges for labour. That affidavit was sworn in December, and in February 2002 he made the payment for $14,107.51. In his later affidavit in paragraph 8 he said: "On 26 February 2002 the Plaintiff caused to be paid by electronic transfer to the Defendants Bank account sum of $14,107.51` being the retention amount which had become due and an amount of $10,000.00 which I considered was a reasonable estimate of the value of the unauthorised work. This estimate was made without regard to the defective work of the Defendant of which I was unaware at the time of payment. Annexed marked "H" is a copy of the Bank Statement showing the withdrawal of $14,112.51 being the above mentioned amount plus $5.00 Bank fee." 16 The deponent goes on to give evidence in the following paragraphs of the defective work which he refers to in that paragraph. Paragraph 8, to which I have referred, does, however, put the plaintiff's view as to what was a reasonable estimate of the value of the work. 17 The defendant, on the other hand, led no evidence to support the reasonableness of the amount of the charges other than tendering letters quantifying the claim and certain calculations. In other words, he has exposed the amount of the calculation but there is no evidence as to whether it is reasonable. 18 In those circumstances I have to consider whether there is a genuine dispute. I have had the benefit of a number of submissions in respect of the principles to be applied and I think the most useful summation of what is a genuine dispute is that given by McLelland CJ in Equity in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. At page 671 His Honour mad the following comments in respect of the expression "genuine dispute": "It is, however, necessary to consider the meaning of the expression 'genuine dispute' where it occurs in s.495H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the 'serious question to be tried' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the Court must accept uncritically as giving rise to a genuine depute, every statement in an affidavit 'however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be' not having 'sufficient prima facie plausibility to merit further investigation as to (its) truth' (cf Eng Mee Yong v Letchumanan (1980) APPLICANT 331 at 341), or 'a patently feeble legal argument, or an assertion of facts unsupported by evidence ' (cf South Australia v Wall (1980) 24 SASR 189 at 194). But it does mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at ACLC 1066; ACSR 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Division 3 of Part 5.4 of the Corporations Law, and to the terms of Division 3: 'These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.' In Re Morris Catering (Australia) Pty Limited (1993) 11 ACLC 919 at 922; (1993) 11 ACSR 601 at 605 Thomas J said: 'There is little doubt that Division 3 ... prescribes a formula that requires the Court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the Court will examine the merits or settle the dispute. The specified limits of the Court's examination are the ascertainment of whether there is a "genuine dispute" and whether there is a "genuine claim". It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the Court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another. The essential task is relatively simple – to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it.)' I respectfully agree with those statements." 19 Having regard to the fact that there is significant evidence by the plaintiff as to what he considers to be a reasonable estimate for the work, and that is not dealt with by the defendant, and having regard to the fact that the claim seems to be basically for a quantum meruit for some additional work not pursuant to the contract, it seems to me there is a genuine dispute in respect of the amount which is said to be due. Accordingly, I make orders 1 and 3 in the application. 20 I have heard submissions in respect of the question of costs. I think, having regard to the fact that there was a payment made by the plaintiff part way through the proceedings, that it should not have full costs, notwithstanding there clearly was arguments about payment before the proceedings commenced. 21 In the circumstances I think the order for costs I make is not order 3 in the application, I order the defendant to pay the plaintiff's costs of these proceedings on and from 1 March 2002. The exhibits to be returned. ********* Last Modified: 04/03/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.